New MD Case Law – Deed Acquired Through Fraud by Son From Dying Mother (Md. App.)

Substitute trustees for refinancing mortgagee, on behalf of
mortgagee, brought foreclosure action against refinancing mortgagor and
personal representative of estate of original mortgagor. The personal
representative filed a motion to stay and dismiss the action, alleging that the
estate was the lawful owner of the property.

The trial court denied the motion. The personal representative appealed and the
court reversed and remanded. The substitute trustees then petitioned for
certiorari. The court of appeals held that the creation of a constructive trust
over property in the prior action did not by itself preclude foreclosure. The
refinancing mortgagee was not a bona fide purchaser of property; however the
refinancing mortgagor was entitled, under the doctrine of equitable
subrogation, to reimbursement of loan amounts expended to pay off the original
mortgage. The original mortgagor’s estate had brought the prior action against
the original mortgagor’s son seeking to void son’s deed on basis of alleged
fraud. During the pendency of prior action, the son had obtained a refinancing
mortgage on property, after which the court in prior action imposed a
constructive trust over property to convey property to estate. As a result, the
refinancing lender was not a volunteer or intermeddler because it had expended
money to retire the original mortgage to protect its interest. Applying
equitable subrogation would prevent the estate from being unjustly enriched by
the refinancing lender’s mistake in making a loan to the son. Judgment was
reversed.

Fishman v. Murphy, 2013 WL 4106699
(August 15, 2013)